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SYNNEX (SNX) to Report Q1 Earnings: What's in the Cards?

Zacks Equity Research

SYNNEX Corporation SNX is slated to release first-quarter fiscal 2019 results on Mar 27.

Notably, the company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 5.53%.

In the last reported quarter, the company’s earnings and revenues beat the Zacks Consensus Estimate and also its guided range. Moreover, the top and the bottom line recorded a year-over-year improvement.

For the fiscal first quarter, SYNNEX expects revenues in the range of $5.225-$5.425 billion. The Zacks Consensus Estimate is pegged at $5.29 billion, which is 16.1% higher than the figure reported in the year-ago quarter.

Non-GAAP earnings per share are projected in the band of $2.70-$2.8. The Zacks Consensus Estimate stands at $2.73, representing a year-over-year increase of 27.8%.

Let’s see how things are shaping up prior to this announcement.

Factors to Consider

SYNNEX is benefiting from a solid performance in both its businesses, stable marketplaces and a solid execution. Further, leverage from the company’s scale and its recent investments are driving its bottom line.

Moreover, in order to improve the business mix, the company is replacing lower margin services with higher value-added opportunities. Although its strategy to move away from top customers to focus on more profitable businesses is an overhang on the top line, it is still proving to be beneficial to the bottom line.

The company’s acquisition of Covergys last October is a key growth driver. New business wins backed by its expanding footprint and increased capabilities of the new consolidation are key catalysts.

Notably, in the earlier reported quarter, Concentrix revenues were $972 million, up 82% from the prior-year quarter on the back of the Convergys acquisition.

The Zacks Consensus Estimate for the Concentrix segment in the fiscal first quarter is pegged at $1.04 billion, reflecting a whopping 104.9% increase from the figure reported sequentially.

However, seasonality in the Concentrix business and the impact of weakness in the telco segment on the purchased Convergys makes us anxious.

On the last earnings call, management noted that Technology Solutions’ year-over-year gross-to-net revenues accounting revenue headwind of around $150-$200 million associated with increased sales in software, cloud and security products, is reflected in the guidance. The effect of ASC 606 adoption is also taken into consideration.

The Zacks Consensus Estimate for the Technology Solutions segment is pegged at $4.23 billion, 4.4% up from the figure reported in the year-earlier quarter but 9% lower than the preceding quarter.

SYNNEX Corporation Price and EPS Surprise

SYNNEX Corporation Price and EPS Surprise | SYNNEX Corporation Quote

What Our Model Says

Our proven Zacks model clearly indicates that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has good chances of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

SYYNEX has a Zacks Rank #3, which increases the predictive power of ESP, but has an Earnings ESP of 0.00% in the combination, which makes surprise prediction difficult for the stock this earnings season.

Stocks With Favorable Combination

Here are a few stocks, which you may consider as our model shows that these have the right combination of elements to beat on earnings in the upcoming releases:

Garmin Ltd. GRMN has an Earnings ESP of +1.29% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Arista Networks, Inc. ANET has an Earnings ESP of +5.71% and is a #1 Ranked stock.

Akamai Technologies, Inc. AKAM has an Earnings ESP of +5.16% and a Zacks Rank #2.

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